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Traditional banking is under threat, according to Benoit Coeuré, head of the Bank for International Settlements’ Innovation Hub.
According to Benoit Coeuré, head of the Bank for International Settlements’ (BIS) Innovation Hub, key pillars of today’s cryptocurrency economy, such as stablecoins and DeFi, pose a threat to the world’s central banks.
DeFi, or decentralized finance, is a suite of crypto products that replicate many common services in traditional finance, like lending and borrowing, but replaces banks and brokers with lines of code.
“Central banks have a job to do—delivering price stability and financial stability—and they must retain their ability to do it. Central bank digital currencies will take years to be rolled out, while stablecoins and crypto assets are already here,” Coeuré reportedly said.
“This makes it even more urgent to start,” he added.
The age of CBDCs
Coeuré is a firm believer in central banks and the role they play in society.
As a result, he favours central bank digital currencies (CBDCs) over stablecoins or other types of cryptocurrencies.
The BIS stated in a report earlier this year that stablecoins “try to import legitimacy by being backed by actual currencies.” According to the paper, stablecoins are only as good as the governance behind the promise of backing.
Coeuré, on the other hand, is less contemptuous.
“Make no mistake: global stablecoins, DeFi platforms, and large IT corporations will continue to disrupt banks’ models,” he continued.
The CBDC progress report
When it comes to implementing a central bank digital currency, China is often regarded as the world leader.
The digital yuan in China was initially proposed in 2017 and will begin the test stage in April 2020. As part of the project’s testing, the People’s Bank of China (PBOC) has airdropped millions of digital yuan to residents around the country since October of last year.
China intends to expand the use of the digital yuan in February 2022, when tourists rush to the nation for the Beijing 2022 Winter Olympics.
Meanwhile, the crypto industry in China has been dealt blow after blow—with a crackdown on crypto mining adding to a pre-existing ban on crypto trading that’s been in place since 2017.